Unearned income surcharge must follow assessed total income, and debatable computation errors cannot be rectified.

Special surcharge on unearned income had to be computed only on the unearned income included in assessed total income, not on gross unearned income. The court treated the surcharge provision as tied to the income component actually forming part of total income and held the Revenue could not enlarge the base beyond that figure. The computation dispute also depended on interpretation of the governing provision, making it debatable rather than an obvious error. Rectification was therefore not permissible under section 154 because there was no mistake apparent from the record, and the point was decided in favour of the assessee.

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Issues: (i) Whether special surcharge on unearned income was to be levied on the net unearned income or on the gross unearned income included in the total income. (ii) Whether the question of computation of surcharge was a debatable issue so as to bar rectification under section 154.

Issue (i): Whether special surcharge on unearned income was to be levied on the net unearned income or on the gross unearned income included in the total income.

Analysis: The surcharge under paragraph A of Part I of the First Schedule to the Finance (No. 2) Act, 1967 is linked to the unearned income included in the total income on which income-tax is levied. For determining the surcharge, the relevant figure is the unearned income component forming part of the assessed total income, and not any amount exceeding that total income.

Conclusion: Special surcharge was leviable only on the unearned income included in the total income and not on the gross unearned income; this issue is decided in favour of the assessee.

Issue (ii): Whether the question of computation of surcharge was a debatable issue so as to bar rectification under section 154.

Analysis: The correctness of the surcharge computation involved interpretation of the statutory expression governing the amount of unearned income included in total income. As the issue was capable of argument and debate, the alleged error could not be characterised as an obvious or patent mistake apparent from the record.

Conclusion: Rectification under section 154 was not permissible because there was no mistake apparent from the record; this issue is decided in favour of the assessee.

Final Conclusion: The reference was answered against the Revenue on both the surcharge computation and the validity of rectification proceedings, and the assessment orders could not be corrected under section 154 on the basis suggested by the Revenue.

Ratio Decidendi: A computation dispute that requires interpretation of the governing provision is a debatable issue and cannot be rectified under section 154 as a mistake apparent from the record; surcharge linked to unearned income must be computed only with reference to the unearned income included in the assessed total income.

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